iftttwall

Submitted by Adam Andrzejewski,

Despite California’s $54 billion budget deficit and $1 trillion unfunded pension liability, there are 340,390 government employees bringing home six-figure salary and pension checks. Recently, though, Gov. Gavin Newsom asked U.S. taxpayers for a bailout.

The governor wrote a letter to Congress requesting $1 trillion in coronavirus 50-state aid. Then, House Speaker Nancy Pelosi obliged by adding $500 billion for the states into the HEROES Act – the bill passed and now awaits action in the Senate.

Here, in part, is why California is asking for taxpayers help.

Our auditors at OpentheBooks.com found truck drivers in San Francisco making $159,000 per year; lifeguards in LA County costing taxpayers $365,000; nurses at UCSF making up to $501,000; the UCLA athletic director earning $1.8 million; and 1,420 city employees out-earning all 50 state governors ($202,000).

Using our new interactive mapping tool, quickly review (by ZIP code) the 340,390 California public employees and retirees who earn more than $100,000 and cost taxpayers $45 billion (FY2018-9). Just click a pin and scroll down to see the results rendered in the chart beneath the map.

Here are a few examples of what you’ll uncover:

• 109,627 teachers and school administrators – including the CEO of Summit Everest charter schools Diane Tavenner ($450,115); and superintendents Michael Lin ($443,875) at Corona-Norco Unified; Polly Bove ($395,257) at Fremont Union High; Christopher Hoffman ($351,885) at Elk Grove Unified; and Al Mijares ($348,276) at the Orange County Dept. of Education.

• 66,403 college and university employees – including the athletic director at UCLA, Daniel Guerrero ($1.8 million), who is retiring amid criticisms that his teams lost too frequently. The school’s football coach, Charles (Chip) Kelly ($3.3 million), compiled a 7-17 record during his first two years and is the most highly compensated public employee in the state. Furthermore, there are 11,310 college and university employees making more than $200,000.

• 62,204 State of California employees – including a nurse, Ito Chikako, at the University of California, who made $501,391 – paid through the state system. David Winsor Sirkin, Sr. Psychiatrist at Correctional & Rehabilitative Services, made $409,399. Corrections paid two dentists $385,596 last year. The chief regulator at barbering & cosmetology made $124,296.

• 45,718 city and town employees – including 1,420 municipal administrators and employees who out-earned the California governor – the highest paid state governor ($202,000). Highly compensated city managers included Deanna Santana (Santa Clara – $396,158); Paul Arevalo (West Hollywood — $353,603); Fredrick Cole (Santa Monica – $342,780); David Ready (Palm Springs – $340,149); Edward Shikada (Palo Alto – $329,080); and Scott Ochoa (Ontario – $328,500).

Reaching out to all governments mentioned, Santa Clara responded saying that their city is complex and they compete for talent in Silicon Valley. Palm Springs responded by saying the city manager is cutting his pay by 20-percent to $288,579.

In 2017, we found that 44 lifeguards in Los Angeles County cost taxpayers between $200,000 and $365,000. Today, it’s worse with salaries comprising only about half the total cost when including overtime, extra pay and benefits.

In total, $45 billion in cash compensation flows to local and state government workers across California earning six figures. Our auditors did not include the cost of benefits.

We also haven’t included the payroll costs of at least 28,000 federal employees making $100,000+ within the executive agencies based in California.

Corruption In San Francisco

San Francisco’s self-titled “Mr. Clean,” Mohammed Nuru, Public Works Director, is best known for failed efforts to keep feces and hypodermic needles out of the public way. Cases of human waste on city streets spiked to 31,000 in 2019 – an all-time high.

Nuru earned a $269,500 annual salary in 2018 (up $55,000 over a seven-year period). Allegedly, that wasn’t enough. In February, Nuru was arrested for charges that included bribery.

Only in San Francisco can team members on the “poop patrol” cost taxpayers up to $184,000 each.

Taxpayer-Expensive Educators

In the community college system, 10,807 employees made six figures and 247 made more than $200,000 last year.

Edward Hernandez, Jr. (Rancho Santiago – $325,799) and Francis Gorrick (West Hills – $316,034) have the highest pensions. In 2015, stakeholders criticized then-president of El Camino College Thomas Fallo for his $345,000 “supersized” salary. Fallo retired and receives a $314,021 pension.

K-12 payrolls show 109,627 teachers and administrators earned over $100,000 per year. Nearly 94,000 of those highly compensated educators are currently employed, and the other 15,735 are retired with six-figure pensions.

Ten educators hit the pension jackpot and retired on $300,000+. These include: William Habermehl (Orange County Dept. of Education – $380,096); Richard Bray (Tustin Unified School District – $329,826); Virginia Shattuck, (Norwalk–La Mirada Unified School District – $327,139); James Smith (Evergreen Elementary – $309,725); and Richard Miller (Santa Anna Unified— $305,066).

Private associations, nonprofits, and lawmakers

All kinds of entities are jumping on the gravy train. Private associations, nonprofit organizations, and former lawmakers have gamed the system for personal gain.

• Assemblyman Jim Cooper (D-Elk Grove) is double dipping the pay and pension systems. Retired at age 50 from the Sacramento County Sheriff, Cooper earned a $173,820 pension. He makes $107,242 as an elected member of the general assembly – although he refused the non-taxable per diem that’s estimated at $39,000 a year. Total benefit: $281,162
• Who knew that the “student unions” on college campuses pay their administrators up to $206,000 and their pensions are guaranteed by taxpayers? The union at UCLA – Associated Students, Inc. – paid four administrators between $191,000 and $206,000 last year. There are 52 student union administrators across the state who made six figures last year. Retirees received pensions up to $136,000.
• Government “associations” of all types are dialed into the public pension system. These associations are organized as “non-profits” and include associations of governments, school boards, water districts, utilities, special districts, and even flood control associations.

We found 314 six-figure administrators who run these government associations, which are funded by taxpayers for $44 million a year. The most highly compensated was Darin Chidsey {Southern California Association of Governments (SCAG) – $289,109}.

SCAG responded to our request for comment saying they are “the nation’s largest metropolitan planning organization” and located in “a very competitive job market.”

Highly Compensated Locals

In the City of Fremont, nearly 700 six-figure employees made $91 million last year. The city attorney, Harvey Levine, was the highest earner at $291,031. Even the animal services manager cost taxpayers up to $130,000 with over four weeks of PTO, pension, and additional retirement annuity benefits – in the first year of employment.

The Sanitation District of Los Angeles has a history of spiking salaries to pad pensions. In fact, four of the top five all-time sanitation high earners are either currently employed or retired from this district: Stephen Maguin ($366,387 – pension); Grace Robinson Hyde ($329,131 – salary); James Stahl ($321,838 – pension); and Robert Ferrante ($306,552 – salary).

The sanitation district responded to our request for comment saying that all laws with respect to compensation were followed and “pension spiking” is not allowed. However, we noticed that some of those retirement pensions exceed current salaries.

Before the COVID-19 crisis, state and local governments in California were plausibly operating. Now, with tax revenues dropping, underlying financial weaknesses are being exposed.

In a move praised by fiscal reformers, Gov. Newsom proposed a 10-percent across-the-board reduction in state employee salaries along with state agency budget cuts of five percent.

However, the governor admitted that if the federal government sends states more aid, then the salary reductions will be restored.

California, in other words, like many states with excessive pay and pension costs, is relying on the U.S. taxpayer to see them through crisis.

Real Vision’s managing editors Ed Harrison and Roger Hirst sit down to discuss the latest developments in markets, macro, and coronavirus. Nick Correa talks about the new waves of infections in South Korea and the country’s unique challenges in containing and stopping the spread.

Having seemingly conquered the world of finance, Ray Dalio and Howard Marks have been competing who can be a more productive writer in recent weeks, and just two weeks after writing a lengthy thesis on the rise and fall of fiat currencies (which had no less than 43 mentions of gold for obvious reasons), Dalio is back to discussing one of his favorite topics, namely the rise and fall of empires, among which the US and China, over the last 500 years. 

The third chapter of his “Changing World Order” series (preceded by Chapter 1 “The Big Picture in a Tiny Nutshell”,  and Chapter 2, “The Big Cycle of Money, Credit, Debt, and Economic Activity” and its appendix “The Changing Value of Money“), takes a closer look at the rise and fall of the Dutch, British, and American empires and their reserve currencies and, in what will spark howls of outrage from both sides of the discussion, touches on the rise of the Chinese empire, which Dalio views as the next ascendent superpower “to bring us up to the present.”

In this latest release of my series The Changing World Order, I will review the rises and declines of the Dutch, British, and American empires and their reserve currencies and will touch on the rise of the Chinese empire to bring us up to the present… https://t.co/Mg9bKHDtRC

— Ray Dalio (@RayDalio) May 21, 2020

Dalio’s latest 10,000-word essay (a 50 minute read according to LinkedIn) concludes that empires – just like humans – have a typical life cycle that ultimately come to an end.

And while we will focus on the specific case of the US vs China in a subsequent post, we wanted to highlight the big picture, or what Dalio deems the key events in the “Big Cycle” behind empires’ rise and fall, for one specific reason: we find ourselves in the phase – namely “printing money and credit” – which according to Dalio is immediately preceding the far more troubling phase of “revolutions and wars.“

Here is Dalio summarizing his stylized empire “boom bust” cycle:

Just as there is a human life cycle that typically lasts about 80 years (give or take) and no two are exactly the same but most are similar, there is an analogous empire life cycle that has its own typical patterns.  For example, for most of us, during the first phase of life we are under our parents’ guidance and learn in school until we are about 18-24, at which point we enter the second phase.  In this phase we work, become parents, and take care of others who are trying to be successful.  We do this until we are about 55-65, at which time we enter the third phase when we become free of obligations and eventually die.  It is pretty easy to tell what phases people are in because of obvious markers, and it is sensible for them to know what stages they are in and to behave appropriately in dealing with themselves and with others based on that.  The same thing is true for countries.  The major phases are shown on this chart.  It’s the ultra-simplified archetypical Big Cycle that I shared in the last chapter.

In brief, after the creation of a new set of rules establishes the new world order, there is typically a peaceful and prosperous period.  As people get used to this they increasingly bet on the prosperity continuing, and they increasingly borrow money to do that, which eventually leads to a bubble.  As the prosperity increases the wealth gap grows.  Eventually the debt bubble bursts, which leads to the printing of money and credit and increased internal conflict, which leads to some sort of wealth redistribution revolution that can be peaceful or violent.

Typically at that time late in the cycle the leading empire that won the last economic and geopolitical war is less powerful relative to rival powers that prospered during the prosperous period, and with the bad economic conditions and the disagreements between powers there is typically some kind of war.  Out of these debt, economic, domestic, and world-order breakdowns that take the forms of revolutions and wars come new winners and losers.  Then the winners get together to create the new domestic and world orders.  

And in case there is any confusion who Dalio expects the next war to be with, he makes it clear:

That is what has repeatedly happened through time.  The lines in the chart signify the relative powers of the 11 most powerful empires over the last 500 years.  In the chart below you can see where the US and China are currently in their cycles.  As you can see the United States is now the most powerful empire by not much, it is in relative decline, Chinese power is rapidly rising, and no other powers come close.  

Confused? In case that chart is a bit confusing, for simplicity Dalio offsers another chart showing the same lines as in that chart except for just the most powerful reserve currency empires (which are based on an average of eight different measures of power that we explained in Chapter 1 and will explore more carefully in this chapter).

Still confused? Here is the bottom line: While we the US is doing this to pretend its economy and markets aren’t collapsing…

… China is creating videos titled “peace behind me, war in front of me.”

 

Authored by Charles Hugh Smith via OfTwoMinds blog,

Demand based on debt, unfulfilled promises and unaffordable habits is burning down…

The first-order effect of the lockdown was demand destruction as shelter-in-place orders and business closures restricted consumers’ ability to spend.

The second-order effect will be the permanent destruction of demand because people will realize they’re better off reducing their consumption of high-cost, questionable-value goods and services. Let’s start with the resurgence of savings, the most basic form of security you actually control and the most basic form of hedging against promises of a return to wonderfulness failing to arrive in the real world.

Comically, security you actually control, i.e. savings, are viewed by the status quo as a mortal threat to the economy: how dare you keep some of your own money rather than squander all of it! Notice how this bit of twisted CNN humor labels savings “hoarding,” as if retaining a bit of your hard-earned wages is evil “hoarding” rather than prudent self-sufficiency.

New threat to the economy: Americans are saving like it’s the 1980s

For those who weren’t alive to experience the 1980s, it was a boom era of widespread prosperity. In a functional economy, savings are understood as one of the foundations of prosperity. In today’s insanely dysfunctional neofeudal economy, savings are a despicable evil because they take the bread right out of the bankers’ and corporate elites’ mouths. How dare you rob poor Jamie Dimon and Jeff Bezos with your awful, horrible, cruel savings of money that you actually control, money that protects you and gives you some security!

In other words: how dare you serve your own needs and interests rather than our monomaniacal obsession with increasing our profits at your expense.

Another second-order source of demand destruction is people realizing they don’t actually need as much XYZ as they once thought. This covers quite a range of services, from tourism to dining out to attending absurdly costly sporting events and concerts to all the video subscription services people pay for but rarely use.

Demand destruction won’t be limited to the periphery. It will also shred big-ticket sectors such as healthcare and higher education. One of the key dynamics in demand for these crazy-expensive services is rarely addressed: the more higher education you “consume,” the greater the pressure to get even more higher education. This also holds true for healthcare: the more you “consume,” the greater the pressure to consumer even more healthcare.

Correspondent AP (Anonymous Physician) delineates the sources of demand for healthcare:

An under appreciated challenge going forward is the destruction of healthcare demand.

The demand for healthcare was generated by three factors, in decreasing order of importance.

1. “Self-Generation” i.e. when healthcare was received, it led to more healthcare being demanded. Healthcare is pretty unusual as a good/service in that it generates its own demand.

2. Marketing. Except for a tiny sliver of high-margin procedures, healthcare is a loss-leader for health systems. The profitable revenues come from foot traffic, commercial real estate ‘appreciation,’ and the sales of personal information.

3. Actual, proven, demonstrably beneficial need. (By far the last).

The ‘Casino’ model of healthcare is driven by this dynamic: tight-margins/high cashflows lead to overbuilding, which leads to more of #s1 and 2 above, which leads to more cashflow, and so the cycle repeats.

People are discovering:

1. The delivery of healthcare entails real risk–even if they’ve mis-apportioned it to COVID-19.
2. They’re doing alright without getting it.
3. Since they aren’t getting it, they’re getting less of it. (See #1 above).

We’re already seeing healthcare corporations whining about a drop in income as “consumption” of “elective surgeries” is not bouncing back to pre-pandemic levels, and people are cancelling their “excuse to bill Medicare or Medicaid” “follow-up” appointments.

The people working in this broken, perverse-incentives system didn’t choose it, they’re trapped in it. The same can be said of every dysfunctional, sclerotic, ridiculously costly system in the U.S. Reform is impossible, given the incentives, regulations and vested interests whose sole purpose is to, in Clay Shirky’s insightful phrase, “preserve the problem to which they are the solution.”

Here’s my summary of the sources of demand for higher education:

1. The higher your level of credentialed attainment, the greater the pressure to get another degree.

2. Marketing: the claim that a college diploma is the one essential passport to secure high-paying careers and therefore worth any price and any sacrifice.

3. Actual learning: near zero on the demand scale.

You know the multi-level marketing of higher education: gee, too bad your Bachelors Diploma turned out to be worthless. The solution is to spend another $100,000 on a Masters Degree.

Dang, too bad about the glut of other job seekers with Masters Degrees. The solution is to invest another 4 or 5 years and another $100,000 (in deferred income if nothing else) on a PhD or professional degree (MBA, etc.)

Shucks, there’s a global glut of folks with PhDs and professional degrees? Well then you’ll have to get a second professional degree…. and so on. There’s no end to the number of credentials one can acquire, and the hope is just one more will do the trick and the over-credentialed student will escape the black hole of a global glut of over-credentialed job seekers.

Then there’s the implosion of demand for commercial real estate and $1 million decaying bungalows. Why blow hundreds of thousands of dollars on design services and renovations if the asset is losing value no matter how much money you pour into it?

Once people were forced out of their manic rut of buy, buy, buy in search of deranging distraction, they’ve realized they’re better off without the expense, the mania and the derangement. The media is cheerleading the crowds jamming into bars, but I suspect a consequential number of those “consumers” will find the things they so longed to resume doing aren’t as fulfilling as they’d expected.

A consequential number of consumers may be questioning the viability and benefits of blowing hundreds of dollars to attend a sporting event. Maybe the $12 cup of beer and the $12 hot dog at the ballpark are no longer worth it.

A consequential number of consumers may be realizing they can no longer afford the splurges they indulged in so regularly, of if they can afford it, they no longer want to trade away savings for mindless indulgences.

There are competing models for healthcare and higher education that cost mere fractions of the systems now imploding due to demand destruction. I outlined a campus-free apprenticeship model of higher education in my 2012 book The Nearly Free University and the Emerging Economy, that lays out an alternative way to credential actual learning: accredit the student, not the institution. (This goes hand-in-hand with my other principle, accredit yourself.)

Demand based on debt, unfulfilled promises, over-regulation and unaffordable habits is burning down. Scapegoating savings is the last desperate propaganda ploy of an exploitive system that was never sustainable.

*  *  *

My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

President Trump’s “Operation Warp Speed,” a public-private partnership to develop a vaccine and ready it for mass production by early 2021, has generated anti-vaccine concerns among some Americans, a new survey finds. 

The survey, published via Reuters/Ipsos on Thursday, found 25% of Americans have no interest in taking a coronavirus vaccine.

About 36% of respondents said they would be less willing to take a vaccine if President Trump said it was safe. Only 14% said they would be interested. 

Reuters/Ipsos surveyed 4,428 Americans between May 13-19 said they would need to review additional research on the vaccine to determine if it was safe. 

A little less than 66% were “very” or “somewhat” interested in a vaccine if made readily available. 

Dr. William Schaffner, an infectious disease expert at Vanderbilt University Medical Center in Nashville, told Reuters, considering there are 92,000 virus-related deaths, he thought there would be a much higher amount of people that would want the vaccine. 

“It’s a little lower than I thought it would be with all the attention to COVID-19,” said Schaffner. “I would have expected somewhere around 75 percent.”

The survey found 14% were not interested at all, 10% were not very interested, and 11% were unsure about subjecting themselves to a vaccine. 

Health experts tell Reuters that, “at least 70% of Americans would need to be immune through a vaccine or prior infection to achieve what is known as “herd immunity,” when enough people are resistant to an infectious disease to prevent its spread.” 

President Trump’s Operation Warp Speed program aims to produce 300 million doses of a vaccine by January, a goal that we’ve said is widely unrealistic.

The president’s constant hype of vaccines has led some people to believe many of the drugs in development are being rushed and could have dangerous side effects. Ron Paul recently warned “rushed-into-production” vaccines for other viruses have had disastrous health consequences for some people. 

Nearly 84% of respondents said vaccines for measles are safe, suggesting that people are doubtful about a rushed vaccine for COVID-19. Of the folks who were “not very” interested in taking the vaccine, 29% of them said they would reassess their thoughts once the FDA approved it. 

Peter Hotez, dean of the National School of Tropical Medicine at Baylor College of Medicine, where his staff is currently developing a vaccine, said: 

“It’s not surprising a significant percentage of Americans are not going to take the vaccine because of the terrible messaging we’ve had, the absence of a communication plan around the vaccine and this very aggressive anti-vaccine movement.”

The poll underlines how political divides among Democrats and Republicans predate the pandemic, but lockdowns have since catalyzed new divides and exacerbating old ones. That being, nearly 20% of Republicans said they had no interest in a vaccine, which was more than double the proportion of Democrats who said the same.

With creepy billionaire Bill Gates and big government rushing vaccines into development and for possible mass production next year — the anti-vaccine movement in America continues to grow. 

Read “Anti-Lockdown Protests Accelerate Across Europe As Second COVID-19 Wave Threat Emerges,” which explains anti-vaccine movements flourishing across the Western world.

Authored by CJ Hopkins via ConsentFactory.org,

Read Part 1 here…

My columns haven’t been very funny recently. This one isn’t going to be any funnier. Sorry. Fascism makes me cranky.

I don’t mean the kind of fascism the corporate media and the fake Resistance have been desperately hyping for the last four years. God help me, but I’m not terribly worried about a few hundred white-supremacist morons marching around with tiki torches hollering Nazi slogans at each other, or Jewish-Mexican-American law clerks flashing “OK” signs on TV, or smirking schoolkids in MAGA hats.

I’m talking about actual, bona fide fascism, or totalitarianism, if you want to get technical. The kind where governments declare a global “state of emergency” on account of a virus with a 0.2% to 1% lethality (and that causes mild, flu-like symptoms, or absolutely no symptoms whatsoever, in over 97% of those infected), locks everyone down inside their homes, suspends their constitutional rights, terrorizes them with propaganda, and unleashes uniformed goon squads on anyone who doesn’t comply with their despotic decrees.

I’m talking about the kind of totalitarianism where the police track you down with your smartphone data and then come to your house to personally harass you for attending a political protest, or attack you for challenging their illegitimate authority, and then charge you with “assault” for fighting back, and then get the media to publish a story accusing you of having “set up” the cops.

I’m talking about the kind of totalitarianism where the secret police are given carte blanche to monitor everyone’s Internet activity, and to scan you with their “surveillance helmets,” and dictate how close you can sit to your friends, and menace you with drones and robot dogs, and violently pry your kids out of your arms and arrest you if you dare to protest.

I’m talking about the kind of totalitarianism that psychologically tortures children with authoritarian loyalty rituals designed to condition them to live in fear, and respond to absurd Pavlovian stimuli, and that encourages the masses to turn off their brains and mechanically repeat propaganda slogans, like “wear a mask” and “flatten the curve,” and to report their neighbors to the police for having an “illegal” private party … and to otherwise reify the manufactured mass hysteria the authorities need to “justify” their totalitarianism.

Yeah, that kind of stuff makes me cranky.

And you know what makes me really cranky?

I’ll tell you what makes me really cranky.

It is people who publicly project themselves as “anti-authoritarians” and “anti-fascists,” or who have established their “anti-establishment” brands and “dissident” personas on social media, or even in the corporate media, either zealously cheerleading this totalitarianism or looking away and saying nothing as it is rolled out by the very authorities and media propagandists they pretend to oppose. I don’t know exactly why, but that stuff makes me particularly cranky.

I’ll provide you with a few examples…

The militant “Portland anti-fascists” who the corporate media fell in love with and made famous for bravely fighting off the Trump-loving Putin-Nazi Menace over the course of the last four years, as soon as the Corona-Totalitarianism began, did what all true anti-fascists do when the state goes full-blown fascist … no, they did not “smash the state,” or “occupy the streets,” or anything like that. They masked-up and started making vegan hand sanitizer.

Popular Internet “anti-imperialists” started accusing everyone opposing the lockdown of being part of some far-right Republican plot to “promote mass death under the banner of freedom” or to “normalize death” to benefit rich people, or being members of a “death cult,” or something. Celebrity socialists took to Twitter to warn that we would “shortly have the blood of thousands of people on our hands,” and call us “anti-vaxxers” and “flat earth fucks.”

Indie political and military analysts patiently explained why governments needed to be able to pull people out of their homes against their will and quarantine them.

Anarchist anthropologists averred that the lockdown wasn’t damaging the productive economy; it was only damaging the “bullshit economy,” and those complaining about being out of work were people whose work is “largely useless.”

Others simply looked away or sat there in silence as we were confined to our homes, and made to carry “permission papers” to walk to work or the corner grocery store, and were beaten and arrested for not “social-distancing,” and were otherwise bullied and humiliated for no justifiable reason whatsoever.

(We are talking about a virus, after all, that even the official medical experts, e.g., the U.K.’s Chief Medic, admit is more or less harmless to the vast majority of us, not the Bubonic Fucking Plague or some sort of Alien-Terrorist-Death-Flu … so spare me the “we-had-no-choice-but-to-go-totalitarian” rationalization.)

My intent is not merely to mock these people (i.e., these “radical,” “anti-establishment” types who fell into formation and started goose-stepping because the media told them we were all going to die), but also to use them as a clear example of how official narratives are born and take hold.

That’s somewhat pertinent at the moment, because the “Brave New Normal” official narrative has been born, but it has not yet taken hold. What happens next will determine whether it does.

In order to understand how this works, imagine for a moment that you’re one of these people who are normally skeptical of the government and the media, and that you consider yourself an anti-authoritarian, or at least a friend of the working classes, and now you are beginning to realize that there is no Alien-Terrorist-Death-Flu (just as there were no “WMDs,” no “Russian hackers,” no “pee-tape,” etc.), and so it dawns on you that you’ve been behaving like a hysterical, brainwashed, fascist minion of the very establishment you supposedly oppose … or at the very least like an abject coward.

Imagine how you might feel right now.

You would probably feel pretty foolish, right? And more than a little ashamed of yourself. So … OK, what would do about that? Well, you would have a couple of options.

Option Number One would be admit what you did, apologize to whomever you have to, and try like hell not to do it again.

Not many people are going to choose this option.

Most people are going to choose Option Number Two, which is to desperately try to deny what they did, or to desperately rationalize what they did (and in many cases are still actively doing).

Now, this is not as easy at it sounds, because doing that means they will have to continue to believe (or at least pretend to believe) that there is an Alien-Terrorist-Death-Flu which is going to kill hundreds of millions of people the moment we stop locking everyone down, and forcing them to “social distance,” and so on. They will have to continue to pretend to believe that this Alien-Terrorist-Death-Flu exists, even though they know it doesn’t.

And this is where that Orwellian “doublethink” comes in. People (i.e., these “anti-authoritarians,” not to mention the majority of the “normal” public) are not going to want to face the fact that they’ve been behaving like a bunch of fascists (or cowards) for no justifiable reason whatsoever. So, what they are going to do instead is desperately pretend that their behavior was justified and that the propaganda they have been swallowing, and regurgitating, was not propaganda, but rather, “the Truth.”

In other words, in order to avoid their shame, they are going to do everything in their power to reify the official narrative and delegitimize anyone attempting to expose it as the fiction that it is. They are going to join in with the corporate media that are calling us “extremists,” “conspiracy theorists,” “anti-vaxxers,” and other such epithets. They’re going to accuse those of us on the Left of aligning with “far-Right Republican militias,” and “Boogaloo accelerationists,” and of being members of the Russian-backed “Querfront,” and assorted other horrible things meant to scare errant leftists into line.

Above all, they are going to continue to insist, despite all the evidence to the contrary, that we are “under attack” by a “killer virus” which could “strike again at any time,” and so we have to maintain at least some level of totalitarianism and paranoia, or else … well, you know, the terrorists win.

It is this reification of the official narrative by those too ashamed to admit what they did (and try to determine why they did it), and not the narrative or the propaganda itself, that will eventually establish the “Brave New Normal” as “reality” (assuming the process works as smoothly as it did with the “War on Terror,” the “War on Populism,” and the “Cold War” narratives). The facts, the data, the “science” won’t matter. Reality is consensus reality … and a new consensus is being formed at the moment.

There is still a chance (right now, not months from now) for these people (some of whom are rather influential) to stand up and say, “Whoops! I screwed up and went all Nazi there for a bit.” But I seriously doubt that is going to happen.

It’s much more likely that the Brave New Normal (or some intermittent, scaled-down version of it) will gradually become our new reality. People will get used to being occasionally “locked down,” and being ordered to wear masks, and not to touch each other, and to standing in designated circles and boxes, like they got used to the “anti-Terrorism measures,” and believing that Trump is a “Russian asset.” The coming economic depression will be blamed on the Alien-Terrorist-Death-Flu, rather than on the lockdown that caused it. Millions of people will be condemned to extreme poverty, or debt-enslaved for the rest of their lives, but they’ll be too busy trying to survive to mount any kind of broad resistance.

The children, of course, won’t know any better. They will grow up with their “isolation boxes,” and “protective barriers,” and “contact tracing,” and they will live in constant low-grade fear of another killer virus, or terrorist attack, or Russian-backed white supremacist uprising, or whatever boogeyman might next appear to menace the global capitalist empire, which, it goes without saying, will be just fine.

Me, I’ll probably remain kind of cranky, but I will try to find the humor in it all.

Bear with me … that might take a while.

Now that banks have had a chance to evaluate the collapse in the economy in the post-covid world, a new round of GDP forecast revisions is coming, and it’s a doozy, with Bank of America spearheading the latest effort by slashing its Q2 GDP forecast from -30% to -40%.

Not without a trace of irony, BofA’s chief economist Michelle Meyer writes that “words cannot describe” the loss in economic output, which is “unlike anything we have seen in modern history. Back in early April when we introduced our forecasts, we penciled in a stunning 10% cumulative drop in output from the peak with the pain concentrated in 2Q with a 30% qoq saar decline.”

But it seems that it was not extreme enough, and according to data released since then, the drop will be more severe, with BofA now looking for a 40% Q/Q saar decline in 2Q, translating to a cumulative loss of 13%. To put this into perspective, in the Great Recession of ’08-09, the economy declined 4%. This recession would clearly be much deeper.

* * *

As BofA previously noted, ignore all the “letter”-descriptions of the current cycle, and instead think of it in phases, of where there are three: phase 1 is the shutdown, phase 2 is the transition and phase 3 is the recovery. The bank has tweaked its assumptions in each phase – bigger drop in phase 1, stronger bounce in phase 2 but weaker recovery in phase 3.  Here are the three phases in detail:

Lockdown: a deeper contraction. We now believe that 2Q GDP growth will be down 40% qoq saar vs. our prior forecast of -30% qoq saar.

• Transition: a faster snapback. An earlier reopening means an earlier bounce in activity. We are revising up 3Q GDP growth to +7% qoq saar vs. -1% qoq saar previously. The gain is entirely driven by a snap higher in consumer spending; we still expect a meaningful decline in investment.
• Recovery: slower. An earlier reopening has prompted health experts to increase estimates for the number of COVID cases, which will slow the recovery. We have also become increasingly concerned about solvency issues and a sticky-high unemployment rate. We now think it will take until the end of 2022, or later, to return to the pre-COVID level of GDP.
• BofA’s new forecasts reflect the recent data and the early reopening, and leaves BofA’s annual GDP to plunge 8.0% this year with a 4.0% rebound next year. The peak-to-trough drop in GDP is 13%. This breaks the previously held post-war record of -4% in the Great Recession.

What is more troubling is that as shown in the chart below, the corona crisis will wipe out 4 years of GDP growth, with BofA now expecting real GDP at the end of 2021 to be where it was at the end of 2017!

Before it goes into more depth on its various findings, BofA issues a word of caution to all those who see a V-shaped recovery in recent data: “it is important to keep in mind that many indicators will show a significant bounce as the economy moves out of hibernation. But what initially looks like a V-shaped recovery is set to lose steam after the initial gain has subsided.“

With that in mind, BofA moves on to the next key subject, the devastation in the labor market and upcoming disinflation. As Meyer writes, “although more than 20 million jobs have been lost over March and April, the jobless claims figures suggest we are likely to see more cuts in the May report”, something we discussed in our report spreading the real jobs report.

BofA now believes that the unemployment rate will reach a peak of 19% at the end of 2Q, while broader measures of unemployment suggest that the rates are already in excess of 20%. In the initial stages of the recovery, the unemployment rate will fall sharply upon reopening but will likely get stuck close to 10% for some time. This, as Meyer warns, is a recipe for disinflation and could prove catastrophic for banks that haven’t provisioned enough for loan losses. The bank forecasts core PCE inflation will reach 0.6% yoy by year-end, although the bank still believes that the US will avoid outright deflation in underlying inflation and that the focus will be on measures of expectations.

One silver lining is that we have not seen any damage to inflation expectations, at least not yet. In fact, the 5-10 year inflation expectations gauge in the University of Michigan consumer sentiment survey has actually crept upwards to 2.6% in May from 2.3% in March, heading to the top of its recent range which of course may merely be a reflection of the prices most Americans truly experience (which are surging) instead those that make up the BLS inflation basket. Indeed, in an economy under lockdown, demand for essentials has exploded higher resulting in a strong bid on prices. For example, food at home prices popped 2.6% mom in April. As a result, BofA says this could “misguide” consumers into believing the higher inflation story (we doubt consumers will be happy to know they are being “misguided” when they pay a record high price for steak ahead of the Labor Day holiday). However, this may prove to be only temporary as broader disinflationary forces take over, with a risk of falling below 0% and therefore entering deflation territory.

Looking ahead, Meyer writes that two of the most critical inputs into her medium-term forecast are i) the path of the virus and ii) the degree of stimulus.

While BofA is currently not forecasting a significant second wave that would prompt shelter-at-home policies to return,  clearly this is a big downside risk. In terms of stimulus, BofA expects the Fed to continue with credit facilities and another fiscal stimulus package albeit smaller and focused on state and local governments. A bigger stimulus plan would present upside risk while lack of support would add to the downside. The path of virus and fiscal response are not mutually exclusive.

Finally, while urging clients to avoid letters to describe the cycle, BofA does just that and in the next chart it looks at four hypothetical types of recoveries: a “V” (upside) a “U” (close to the current), an “L” (downside) or a “W” (downside). In all cases, it assumes that output falls by 40% annualized in 2Q and trend growth of 1.8%.

• In the V-shaped recovery example, GDP gets back to potential in four quarters (by the end of 1H 2021) and then remains on trend. Therefore the recovery is twice as long as the downturn and lost output is not recovered. Still, this scenario would require nearly 18% growth over the next year, which we think is unrealistic.
• In the U-shaped recovery scenario, GDP takes longer to return to potential and more output is permanently lost. GDP gets back to trend at the end of 2022. Even this requires an average of 8% growth over the next ten quarters. Notice that BofA’s baseline forecast is closest to a “U” or “swoosh” scenario.
• An L-shaped recovery is the slowest, with the greatest permanent loss in output. It takes until the end of 2023 for GDP to return to its pre-COVID level. Growth averages 4% in that period.
• What about a “W”? The most likely scenario for a W-shaped (“double dip”) recovery is a second major virus outbreak in the fall/winter, which causes another round of shutdowns. There are many possibilities depending on the severity and duration of the shutdowns.

Finally, for all the charlatans who focus on Q/Q change instead of Y/Y or trendline, chart 7 illustrates the pitfalls of conflating levels and growth rates. In all scenarios, GDP growth would look quite robust initially. This is because when the economy re-opens, baseline economic activity will be so weak that growth will almost surpass its trend rate for a few quarters. This underscores the importance of considering the level of GDP.

Or, as BofA realistically concludes “we cannot simply snap our fingers and return the economy to the way it was prior to the shock from COVID-19.”